How do you value a memory semiconductor stock like SK Hynix when no one can predict DRAM prices? Equity analyst Shan Rui Yeo walks through the team's Monte Carlo valuation framework: a discounted cash flow run through thousands of scenarios that prices the business on a distribution of returns rather than a single forecast. He also explains how two-times leveraged single-stock ETFs have been amplifying SK Hynix's daily price swings, why regulators and Korean brokers are responding to retail leverage, and why flow-driven volatility can be a gift for long-term investors. The through-line: memory can be cyclical, structurally growing, and wealth-creating all at once.
0:00 - Introduction & Disclaimer 0:21 - How Do You Value a Memory Stock Amid Huge Uncertainty? 0:54 - Monte Carlo Valuation: Pricing SK Hynix on a Distribution of Outcomes 5:27 - Day-to-Day Volatility: Fundamentals or Flows? 6:17 - How 2x Leveraged Single-Stock ETFs Amplify SK Hynix Price Swings 9:40 - What Investors Underappreciate About the Memory Industry 10:21 - Closing Thoughts & Subscribe
Key Takeaways
Key uncertain variables (DRAM prices, supply response, China risk) are modelled as ranges and run through thousands of scenarios; the output is a distribution of returns, treated stochastically.
SK Hynix scenarios: bull (prices hold through the decade), realistic (decline from 2028 as supply arrives), bear (accelerated decline on over-investment and Chinese supply).
The test is being paid adequately across the whole distribution, not picking the right scenario; the distribution centred around 12% with positive skew.
New data points (LTAs signed, capacity expansion) update the distributions; position sizing follows the shape, and the team trimmed as the shares ran.
Two-times leveraged ETFs rebalance by buying after rises and selling after falls, amplifying 10 to 15% daily moves in SK Hynix.
Flow-driven volatility widens the gap between price and value, which long-term investors can use.
Memory can be cyclical, structurally growing, and wealth-creating at the same time.
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Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore.
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